News On Brazilian Contract Law – Procedural Conventions

Author:Ms Simone Lahorgue Nunes and Rafael Zabaglia
Profession:Levy & Salomao Advogados
 
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The possibility of parties regulating certain matters related to existing or potential court proceedings is not new under Brazilian legislation, but has been recently boosted following the enactment of the current Brazilian Civil Procedure Code in 2015 (the "CPC"). This doctrine, which has a German footprint, is recognized in several European jurisdictions and might flourish in Brazil in the near future.

"Procedural Conventions" can be defined as the agreements pursuant to which parties exercise a statutory right to negotiate certain matters related to court proceedings either in the course of those proceedings or even before they are initiated, i.e., during the contractual negotiation phase. In this latter case, procedural conventions can be inserted as part of the underlying transaction documents or be entered into as standalone contracts.

The now-defunct Civil Procedure Code of 1973 already allowed parties to agree on specific matters on a limited basis, such as the definition of the venue for court disputes (article 111), the applicable term to perform certain acts (article 181) or the voluntary stay of the proceedings (article 265, II). The choice of arbitration instead of litigation as the dispute resolution method could also be seen as a procedural convention.

Not only has the CPC replicated those provisions, it has further extended the reach of procedural conventions. This principle is now enshrined as a general provision ("cláusula geral") under article 190 of the CPC, broadly allowing the parties to modify matters related to the proceedings so that these can be adjusted to the specific nature of the underlying dispute and to agree on each party's onuses, obligations, faculties and powers in the context of litigation, whether in advance of the dispute or while it is already pending.

The only limitations under article 190 of the CPC are that (a) procedural conventions are only applicable to disputes involving claims that the parties are allowed to settle pursuant to statute, and (b) the courts have the power to void abusive procedural conventions in standard form contracts (the so-called "adhesion contracts") and in contracts in which there is a clear imbalance between the signatory parties.

Procedural conventions are potentially a very useful resource in transactional matters, since pursuant to the CPC parties may agree, for example: (a) on the venue for disputes (article 63); (b) on the production of a consensual expert report...

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